Three external votes against the RBNZ Governor on OCR | Herald NOW Business

Added: 2026-05-28

[00:00:00]It's budget day. Finance Minister Nicola Willis is third and in a few hours journalists head into lockup to get a first look at the fiscal plan for the country. Senior correspondent Katie Bradford is in Wellington and joins me now with Westpac chief economist Kelly Eckhold. Uh Guys, I imagine there's a lot of talk there about what's going to happen. I'm going to just throw it over to you there, Katie. Take it away.

[00:00:23]Morena Daga, thank you for having us.

[00:00:25]Big day here in the beehive and Kelly, um we did actually want to just quickly touch first on that OCR announcement yesterday. Uh split decision there. What do you think that sees about where the OCR is going to track? Yeah, well, it's a bit of a nail-biter, wasn't it? I mean, they're pretty clear that the OCR is heading up this year and it looked like they were were probably thinking about 3% is where it'll be at Christmas time.

[00:00:49]Um the debate is around really when it's going to start. We have the three externals basically voting against the governor and her colleagues to say, "Well, we think we should get on with it now." Yesterday, um they're holding the the internals are holding back. So, it really is going to come down, I think, to what is it going to take to get the governor over the line to start tightening because in the end, she's the the key influence on the internal members.

[00:01:13]Um markets are talking about it happening in July. I just wonder about that because I think the internal members seem to be a bit concerned about how weak the economy is. And also, the sort of evidence I think they want to know about how persistent are the inflation pressures going to be. I don't think you get that information until late July when we see the second quarter CPI. So, I think the markets might have just gotten a bit ahead of themselves.

[00:01:39]Well, speaking of predictions and forecasts uh and all of that, on to fiscal policy with the budget today, how much is the fuel crisis going to throw out what we might see when we open those books today? It'll have a dramatic effect and the reason I think that the budget is a bit later than expected is that Treasury had to reopen the books to basically redo their forecasts cuz usually they do this process in March, finalize it in early April, and and here we are today. But of course, early April was a bad time to be finalizing forecasts. They provide us a whole lot of scenarios which basically suggested anything from a probably a pretty meh growth growth year to perhaps something closer to recession. Um they're going to have to pick between those things. That will drive how big is the hole going to be in revenue and how much pressure the minister is going to be under to find compensation savings to be able to keep that surplus in 2029-30.

[00:02:35]There's obviously a lot of short-term pain. How does the government How's get the finance finance minister going to look through the short term and go to the medium and long term and look at investment and growing jobs and growing the economy? Well, the government has signaled that there's going to be a couple of billion extra in investment going in at this budget to try to basically do exactly that. Um for a start off, I think the government will have optimism that the war will end and energy prices will fall. So we're probably looking at a situation where it's growth delayed, not canceled. And that's kind of important, I think, if you think about a medium-term focus. I could easily imagine though that this extra couple of billion they have to spend, um tough geopolitical environment, I think defense will be very high on the list of priorities.

[00:03:20]Unfortunately, that's the sort of spending that doesn't often grow productivity that much, but it does reduce risk and that's worth a lot in this environment. Chris Bishop seemed to be hinted yesterday that there will be a feed button there for infrastructure as well. There has of course been all the talk around um not going ahead with the fuel tax rise that's expected in January. Do you think we'll see that confirmed today?

[00:03:41]Yeah, you know, I well, I certainly think we'll see some infrastructure spending. The country is crying out for it and also the government has indicated they need some shovels in the ground basically to generate a few jobs cuz we sort of need a few, don't we?

[00:03:54]Um the fuel tax thing's a bit interesting because like that's just a delay of the inevitable because in the end that money is required for investment in the roads. Now, well, let's see how that goes because um you know, if that fuel tax increase isn't going to happen till the start of next year, well, by then your price could be quite a lot lower, your petrol price could might be quite a bit lower and you might be just thinking, well, perhaps just time to get back to the plan at that stage.

[00:04:17]>> A lot of crystal ball gazing there for the government. Just quickly, uh any winners or losers you think we might see today? Well, the defense industry is going to be a winner, particularly if they start allocating contracts to some of these New Zealand providers that can do things like drones, etc. So, that's that's obviously a winner, a clear winner. Um the this gas terminal that's going to go on in Taranaki, I think that's likely to see some funding and some support, so that's obviously quite good for that um Taranaki region, for example. Arguably probably quite good for the rest of us as well in that if we have a dry year, the the elec- electricity prices won't become quite so eye-watering.

[00:04:54]The losers though, well, I mean, you've heard about the public sector cuts.

[00:04:58]That's how it's all needing to be paid for. We can't escape the fact that there's just no money in the kitty here. The money that they thought they were going to have at the end of February has been ripped away by Donald Trump and they're just having to find that from wherever they can.